Piwowar calls Fiduciary Rule ‘misguided'

The SEC Commissioner detailed his concerns with the regulation, which became partially effective in June.

US Securities and Exchange Commissioner Michael Piwowar has criticised the Fiduciary Rule implemented by the Department of Labor, calling on it to ‘reconsider this misguided rulemaking,’ in a letter published by the SEC.

The rule is designed to prevent investment advisors from giving conflicted advice relating to individual retirement plans.

The letter was in response to the DoL’s public consultation, prior to the regulation’s proposed full application in January 2018.

Piwowar outlined a three-point critique of the DoL’s Fiduciary Rule.

The Fiduciary Rule is “dismissive of the efficacy of conflict of interest disclosure, a view that runs contrary to decades of Commission experience,” he wrote, adding it was “excessively dour.” He urged the DoL to “work with the Commission and its expert staff, who may bring to bear our decades of experience…in disclosure-based regimes.”

“Second,” wrote Piwowar, “the Fiduciary Rule fails sufficiently to distinguish ‘selling’ activities from ‘advice’ activities, undermining the Commission’s longstanding approach to regulation of broker-dealers and investment advisors.” He added that there was already “robust regulatory scrutiny” for broker-dealers’ fiduciary duties.

Piwowar also objected to the fact that “the effects of the Fiduciary Rule will extend beyond retirement accounts and will be disruptive of the broker-client relationship in general.”

Private equity firms are increasingly keen to break into the lucrative 401(k) market, which traditionally shuns the asset class because of its illiquidity and the large minimum investment. Partners Group and Pantheon have launched 401(k)-specific products, while Carlyle, Blackstone and KKR have unveiled products targeting individual investors.
Repealing the Fiduciary Rule would improve these firms’ access to the retirement market, unlocking a significant proportion of the estimated $6.8 trillion currently held in individual retirement plans, pfm wrote in February.